Soybeans:

January soybeans advanced 3.75 and March +2.25 cents on light volume of 143,673 contracts. Total open interest declined by 1,310 contracts, which relative to volume is approximately 60% less than average. The January contract accounted for loss of 7,113 of open interest. As this report is being compiled on December 16, January soybeans are trading 15.25 cents higher while March is +15.75. January soybeans have made a high of 13.43 1/2 on December 16 while March 13.30 1/2, which is below the highs of 13.47 and 13.31 made on December 12.

The only position in the soybean complex is the short call recommended earlier last week. We wouldn’t advise risking more than 3 or 4 cents on the trade before liquidating it. Conceivably, January soybeans could attempt to retest the December 10 high of 13.53 1/2, but we don’t think this is likely.

Soybean meal:

January soybean meal advanced $2.50 while March +1.70 on total volume of 64,571 contracts. Total open interest increased by 1,356 contracts, which relative to volume is approximately 20% below average. December and January soybean meal lost 3,862 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on December 16, January meal is trading $5.60 higher while March +6.00. Do we have no recommendation for soybean meal at this juncture. Stand aside.

Corn:

March corn lost 8.75 cents on surprisingly light volume of 170,954 contracts. Volume declined from the 235,276 contracts traded on December 12 when March corn lost 5.00 cents and total open interest declined 2,437 contracts. The December contract lost 227 of open interest. As this report is being compiled on December 16, March corn is trading 2.00 cents lower and has made a new low for the move at $4.20 1/2. It is inevitable that March corn will take out the December 2 low of $4.18 1/2, and the rally of approximately 15 cents that occurred from December 2 through December 10 was disappointing to say the least. It appears likely that corn will continue to drift lower until the January WASDE report which will be released during the 1st week of the month. Corn remains on a short and intermediate term sell signal. Stand aside.

Chicago Wheat:

March wheat lost 5.00 cents on volume of 66,733 contracts. Total open interest declined by 188 contracts, which is minuscule and dramatically below average. The market made a new low of $6.26 1/2 on December 13 and this has been taken out on December 16 with another new low of 6.21. Managed money increased their net short position during the latest COT report, and although from a price point of view wheat looks terrible, the fundamentals are actually stronger than most people think. Like corn, it appears that wheat will continue to drift lower until the January WASDE report. On December 8, we advised clients to liquidate their short put positions, and now recommend a stand aside posture. Chicago wheat remains on a short and intermediate term sell signal.

Cotton:

March cotton advanced 16 points on volume of 18,424 contracts. Total open interest increased by 381 contracts, which relative to volume is approximately 20% below average. The price and open interest action is very positive, however cotton’s daily low has never been above OIA’s key pivot point of 82.95. It is absolutely crucial for cotton to accomplish this if it is to move higher. On December 13, cotton made a new high for the move at 83.42, and as this report is being compiled on December 16, the high has been 83.24. Cotton may just be consolidating at this juncture, or is ripe for a short-term pullback, or even a reversal. Accordingly, we recommend tightening up sell stops and/or writing out of the money calls against futures contracts to mitigate any potential loss.

Coffee:

March coffee advanced 3.95 cents on volume of 24,548 contracts. Volume was the highest since December 10 when 25,989 contracts were traded and volume on December 13 was the second-highest for the month of December. On December 13, total open interest declined by 2470 contracts, which relative to volume is approximately 200% above average meaning that both longs and shorts were massively liquidating as coffee prices traded to a new high for the move at 1.1550. As this report is being compiled on December 16, March coffee is trading 60 points higher after making a new high for the move at 1.1725. The fundamentals for coffee are bearish, and we may be seeing a technical rally from an oversold condition, but this does not mean that coffee prices cannot continue to move higher. On the other hand, we cannot rule out that we may be seeing the extent of the rally and that coffee may reverse. Like cotton, we recommend tightening up sell stops on futures positions and write out of the money calls to mitigate risk on a pullback or reversal.

Live cattle:

February live cattle lost 25 points on light volume of 31,464 contracts. Total open interest declined by 2,785 contracts, which relative to volume is approximately 185% above average. The December lost 1,911 of open interest. As we pointed out in the December 15 Weekend Wrap, liquidation came from the commercial sector rather than from speculators. We would be considerably more bullish on cattle if the large number of speculative longs had been reduced. As this report is being compiled on December 16, February cattle is trading 60 points higher on light volume. Cattle remains on a short-term sell signal, but an intermediate term buy signal. The key pivot point to watch in February cattle is 1.32330. A close below this would signify lower prices ahead.

Lean hogs:

February lean hogs lost 82.5 points on light volume of 31,464 contracts. Total open interest increased by 696 contracts, which relative to volume is approximately 15% below average. The February and December contracts lost a total of 1,863 of open interest, which makes the total open interest increase much more impressive (bearish). This is the 1st time since hogs generated an intermediate term sell signal on December 6 that we have seen total open interest increased on a price decline. This is bearish and confirms the downtrend in hogs. Continue to hold bearish positions.

WTI crude oil:

January WTI crude oil lost 90 cents on volume of 565,130 contracts. Total open interest declined by 6,155 contracts, which relative to volume is approximately 50% below average. The January contract accounted for loss of 27,393 of open interest. As this report is being compiled on December 16, January WTI is trading 90 cents higher on low volume. We continue to be unimpressed by the action of WTI and recommend a sideline stance until such time that a short-term sell signal is generated. WTI remains on a short and intermediate term buy signal. Stand aside.

Brent crude oil:

February Brent crude oil lost 6 cents on light volume of 573,036 contracts. Total open interest declined by 25,309 contracts, which relative to volume is approximately 75% above average meaning liquidation was heavy as Brent made a new low for the move at $107.61. This is the lowest for the February contract since November 25 when it reached $107.58. The January contract lost a massive 38,294 of open interest, which explains the heavy liquidation. Brent remains on a short and intermediate term buy signal, but we think it will likely work its way lower in the coming days. Stand aside.

Natural gas:

January natural gas lost 5.8 cents on volume of 394,769 contracts. Total open interest increased by 1,856 contracts, which relative to volume is approximately 50% less than average. The January contract accounted for loss of 17,313 contracts. The loss on December 13 was the 1st since December 6 when natural gas lost 1.8 cents and open interest declined by 5,907 contracts. With major open interest increases during the course of the rally, it is somewhat surprising that total open interest did not decline on Friday, especially since the January contract lost over 17,000 contracts of open interest. As this report is being compiled on December 16, January natural gas is trading 6.7 cents lower and has made a new low for the move at $4.203 on low volume. It is apparent based upon the open interest action on December 13 and volume on December 16 that longs are refusing to liquidate on setbacks. This may set the stage for a major decline once cold-weather abates. The high on December 12 was $4.434 and 4.443 on December 13, which is the area to watch on any subsequent rally. Do not short the market and do not initiate new bullish positions. Natural gas remains on a short and intermediate term buy signal.

Copper:

March copper advanced 1.65 cents on volume of 48,536 contracts. Total open interest increased by a heavy 2,249 contracts, which relative to volume is approximately 75% above average meaning that new longs were aggressively initiating positions and pushing prices higher. As this report is being compiled on December 16, March copper is trading 1.55 cents higher and has made a new high for the move at 3.3320, which is the highest price for March copper since October 30 when it reached $3.3330. As we said in the December 15 Weekend Wrap, for copper to continue its move higher, the low for the day must be above 3.2852 and 3.2923. On December 16, the low for the day has been 3.3005. Continue to hold the bull spread of long March-short July-September-December.

Euro:

The March euro lost 10 pips on volume of 227,218 contracts. Total open interest declined by 3,645 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on December 16 the March euro is trading 28 pips higher. Stand aside. The euro remains on a short and intermediate term buy signal.

British pound: On December 13, GBP/EUR generated a short-term sell signal, but remains on an intermediate term buy signal. 

The March British pound lost 55 pips on fairly heavy volume of 129,380 contracts. Total open interest declined by a massive 7,065 contracts, which relative to volume is approximately 120% above average meaning that liquidation was extremely heavy on the decline.We expect further declines in sterling.

S&P 500 E mini:

The March S&P 500 E mini lost 0.25 points on volume of 2,553,426 contracts.Total open interest increased by 100,518 contracts. The heavy volume and big increase of open interest is attributable to the imminent expiration of the December contract. As this report is being compiled on December 16, the March E mini is trading 13.50 points higher. We continue to recommend long put protection for those clients who hold on equity positions.